Prospective borrowers with a job gap longer than 30 days will typically need to provide a letter of explanation describing the gap in employment.
At Veterans United, our broad approach to gaps in employment is based in part on the duration of your job gap:
- 0-2 month gap: These situations can often move forward immediately as long as we have the most recent 30 days’ worth of pay stubs from your old job. We will verify that you’ve started the new job, your exact pay and that you’ll receive your first pay stub prior to your first mortgage payment.
- 3-6 month gap: These can require anywhere from 30 days to six months back on the job depending on the reason for the gap, type of job, total work history, length of time in the field and more.
- 6-12 month gap: These can require six to 12 months back on the job depending on most of the factors above.
- 12+ month gap: These situations will typically require 12 months back on the job unless the circumstances were beyond the borrower’s control.
Remember, too, that these are broad baselines and not set-in-stone rules.
Talk with a Veterans United loan specialist at 855-259-6455 for more details.
It’s also critically important to understand that it’s not just a matter of finding new employment and being back to work for a certain number of months. The kind of job you take, the way it relates to your previous work experience or education, and how you get paid can all affect whether a lender will ultimately consider your income stable, reliable and likely to continue.
For example, let’s say it took you two months to find a job after separating from the military. From a job gap perspective, that might not pose a problem.
But if that job is in a completely different career field from your MOS, or if most of your pay comes from commission, lenders are going to put on the brakes.
Temporary Leave From Work
Lenders may have additional requirements for prospective borrowers who are on a temporary leave from work during the loan process. Policies can vary among lenders.
At Veterans United, we consider any leave shorter than six months to be temporary, as long as it’s not actually a job change.
When we verify your employment situation, if your employer indicates you’re on temporary leave, we’ll look at your return date when evaluating your income:
- If you’re coming back to work before your first mortgage payment is due, we can consider your regular income for loan qualification.
- If you’re returning after that first payment is due, we will consider the lesser of your temporary leave income (if you’re receiving it) and your regular income. We can also consider available assets, as long as they can keep your monthly income consistent for at least three years.
In addition, we would need written confirmation of your intent to return to work and your anticipated return date. Your employer would also need to confirm in writing that you can return to work at a comparable position and pay rate.
Changing jobs during your loan process or right after your closing can present challenges. Lenders want to make sure you’ll continue to have stable, reliable income that’s likely to continue.
They’ll often want to ensure there’s continuity between the old job and the new one.
If you’re jumping to an entirely new career field, that’s likely to put your homebuying journey on hold. Even a promotion could be problematic if some or all of your income switches to a commission basis, for example.
These situations are always evaluated on a case-by-case basis.
If you’re starting a new job after your loan closing, lenders will also need to take a deeper look.
At Veterans United, we would typically need to approve you based on the lessor of the two incomes, although borrowers with sufficient assets may be able to count the higher future income. Also, there can’t be any contingencies regarding your future job.
If there’s a gap between your current job and the start of your future job, we could move forward as long as the gap is less than 60 days and you have sufficient cash reserves on hand.
In this case, you would need one month’s worth of mortgage payments in reserve for a gap up to 30 days and two months’ of reserves for a gap between 30 and 60 days.
Lenders will confirm your employment situation on or just before your closing day. Talk with your loan officer about any pending changes to your employment as you move through the loan process.